The week of October 14 had quite a few developments in the market and in the oil patch. With crude oil ending above $50 for the second week in a row, and with rig counts still rising, it turns out that many more investors have started warming up to the oil patch again.
Don’t forget that there is no such thing as a free lunch. Some oil and gas companies remain under extreme duress. Some of the oil stocks have recovered as much as 100% to 200% off of their panic induced bottoms seen in late 2015 or early 2016. And then there is the pending OPEC deal, which of course there are zero guarantees that they will live up to the plans.
However, other positive issues have been seen in oil and gas. PNC Financial said on Friday that the risk for energy defaults has largely subsided. Other banks have hinted that their default risk exposure to the energy sector has become much more tolerable. The ratings agencies have even suggested that the worst of the bankruptcies are likely behind us rather than ahead. Another Permian merger was seen, and there was even an oil services IPO this past week.
24/7 Wall St. reviews dozens of analyst research reports each morning of the week. This ends up being hundreds of analyst calls each week, and many of those calls are in the oil and gas sector. Our goal is to find new investing and trading ideas for our readers. Some of these analyst research reports cover stocks to buy, and some reports feature stocks to sell or avoid.
Here are 13 very positive analyst calls in the oil and gas sector. Not all are new Buy, Outperform or Overweight ratings, but the initiations and upgrades come with above average implied upside. Just remember that analysts are not always right, and sometimes they are just plain wrong.
Anadarko Petroleum Corp. (NYSE: APC) saw Deutsche Bank raise its rating to Buy from Hold on October 13, with a new price target of $77. The prior close was $63.93, and shares closed at $63.37 on Friday. After so many analysts got burned trying to maintain upside calls during the drop in 2015, now Anadarko shares have more than doubled from the 52-week low. Its year high is $73.87, and its consensus analyst price target is $70.90.
Baker Hughes Inc. (NYSE: BHI) was reiterated as Outperform and the price target was raised to $59 from $50 at RBC Capital Market on October 10. The prior closing price was $52.84, and Baker Hughes shares were at $51.60 prior to the rig count data being released on Friday. The consensus price target is $52.84, and the 52-week trading range is $37.58 to $56.81.
Cheniere Energy Inc. (NYSEMKT: LNG) could be set to rise close to 30%, if Credit Suisse is correct here. The stock was started as Outperform with a $53 price target, based on the coming reintegration of the Cheniere MLP. Shares were trading at just under $41 on Friday’s close, and the consensus price target was $50.10 at the end of the week. The 52-week range is $22.80 to $51.96.
Halliburton Co. (NYSE: HAL) was reiterated as Outperform and the price target was raised to $58 from $53 by FBR Capital Markets on October 14. The prior close $47.02, close to Friday’s close at $46.97. If FBR’s target gets hit, then that raise and the dividend would make for a 25% gain. Even Citigroup raised its price target to $57 here for a call that Halliburton shares can reach 2014 levels again. What is interesting here is that Halliburton’s 52-week high is $47.96 and its consensus price target is now $51.52.
Whiting Petroleum Corp. (NYSE: WLL) was named as the top pick in the exploration and production space at SunTrust Robinson Humphrey on October 10. The recent changes at Whiting indicate a flat $600 million spending estimate, and the company should benefit as oil approaches $50 per barrel, as the stock was trading in the mid-30s the last time oil was above $50. SunTrust increased its price target to $20 from $18, based upon its 2017 EBITDA estimate of $1.2 billion. Whiting shares were up 4% at $9.40 after the call, leaving room for it to double if the call proves to be right. The 52-week range is $3.35 to $20.66, and the stock was trading at $8.68 on Friday’s close.
Diamondback Energy Inc. (NASDAQ: FANG) saw what may have been more than 10 price targets raised by analysts after its guidance. Shares popped big on Monday as Diamondback increased its production guidance. Its shares ended trading at $100.90 on Friday, in a 52-week range of $55.48 to $106.84. The consensus price target is $113.41. Canaccord Genuity raised its price target to $116 from $103 and sees Diamondback as one of the top performers in the Permian Basin, with solid capital efficiency and a solid balance sheet. Wunderlich raised its price target to $130 from $110. Other price target hikes were seen by UBS, KLR, Raymond James, Nomura and many more.
Other oil and gas sector calls were seen as follows during the week ending October 15:
Abraxas Petroleum Corp. (NASDAQ: AXAS) was raised to Accumulate from Neutral with a $2.50 price target at Seaport Global on October 10. The prior closing price was $1.69, but the shares initially jumped 6% higher to $1.79 on the news. Its 52-week range is $0.65 to $1.93.
Evolution Petroleum Corp. NYSEMKT: EPM) was started as Outperform with a $10 price target at Scotia Capital Markets on October 10. It had previously closed at $7.40 but was up at $7.90 shortly after the call. Its 52-week range is $3.60 to $8.45.
National Fuel Gas Co. (NYSE: NFG) was raised to Buy from Hold at Jefferies on October 13, and the firm also added it to the Jefferies Franchise Picks List with a $67 price target. Shares closed trading at $54.03 on Friday.
Noble Energy Inc. (NYSE: NBL) was started with a Buy rating and assigned a $44 price target at Mizuho on October 14. The prior closing price was $35.45, but shares ended the week at $35.18. The consensus price target is $43.63, and the 52-week range is $23.77 to $39.85.
Noble Midstream Partners L.P. (NYSE: NBLX) received mostly positive analyst coverage upon the expiration of its quiet period. Only Deutsche Bank did not issue upside when the rest of the pack covered it on October 10. The seven analysts that started coverage would have an implied price target of close to $34.
PetroQuest Energy Inc. (NYSE: PQ) was raised to Overweight from Equal Weight with a $5 price target at Capital One on October 10. The prior closing price was $3.66.
Plains All American Pipeline L.P. (NYSE: PAA) was raised to Buy from Hold at Deutsche Bank on October 10, and the price target was raised to $37 from $31. The stock was at $31.13 ahead of the call, and its shares ended trading at $32.18 on Friday. Its 52-week range is $14.82 to $33.00, and the consensus analyst target is $31.45.
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